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Buying a car before filing for bankruptcy

South Carolina residents who are planning to file for bankruptcy may wonder how purchasing a car could affect their petition. Though taking on new debt before a bankruptcy filing is usually not advisable, financing a car can actually benefit some situations. However, it is important to make sure that a car purchase is made 'in good faith" so that it does not send up any red flags.

A bankruptcy trustee will likely evaluate the details of a recent car purchase to determine whether the purchase was absolutely necessary. The trustee will probably not like to see a car purchase right before a bankruptcy filing if the newly purchased car is expensive or the debtor already owned driveable cars. Buying a car the day before filing a bankruptcy petition is also a red flag.

As long as a debtor genuinely needs the car that was purchased, the vehicle will likely be exempt from liquidation in a Chapter 7 bankruptcy. A car purchase can also work out in a debtor's favor because it can turn non-exempt cash into exempt property. It may also be a good idea to take on a financed car purchase before filing for bankruptcy because the car payments can help debtors to improve their credit score after going through the bankruptcy process.

Taking on new debt before filing for personal bankruptcy is usually not a good idea, but there are some exceptions. A bankruptcy law attorney might help a debtor to determine whether or not certain purchases should be made before filing for bankruptcy. An attorney may also help prospective filers to maximize their use of exemptions in the bankruptcy process.

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The Huggins Law Firm, PA

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